PTT

PTT Plc

4Q13 profit drops 50.2%qoq as projected
PTT posted 4Q13 net profit at B15.4bn, plunging 50.2%qoq as projected due to
the following reasons. 1) Shared profit from subsidiaries in both refinery and
petrochemical businesses (TOP, PTTGC, SPRC, IRPC, and BCP) fell as much as
51.5%qoq. 2) PTTEP’s profit decreased significantly by 58.3%qoq mainly because
of a Fx loss and hiking tax expense. 3) PTT booked a Fx loss of B5bn, versus a Fx
gain of B2bn in the prior quarter. However, PTT’s earnings became vigorous again
in 4Q13, thanks to a 4.2%qoq increase in sales of products from the gas
separation plant after GSP#5 could resume its production at 50% of its capacity
for a full quarter and wider product spreads. Overall, PTT's FY2013 net profit was
B94.7bn, down 9.5%yoy.
- 1Q14 profit to rebound qoq
We project the profit in 1Q14 to rebound from 4Q13. Profit from the gas
separation plant is anticipated to increase following rising profit prices, while
shared profit from subsidiaries is also believed to improve from 4Q13. Sale
volume of PTTEP would increase after the company could recognize Natuna Sea A
project for a full quarter, under an assumption for stable petroleum selling price
from 4Q13. Meanwhile, the refinery business will benefit from rising GRM on
seasonal effect, reflecting from year-to-date Singapore GRM that has been
US$6.6/barrel on average or an increase of 54%qoq. Furthermore, some
petroleum supply will disappear from the market in late 1Q14 when global
refineries undergo an annual turnaround after running at their full capacity during
winter. Likewise for the petrochemical business, olefin spread is projected to
increase further, reflecting reviving demands. For FY2014 outlook, continuous
profit growth of 14.2%yoy is foreseen after all units of PTT run at their complete
capacity, while olefin products would also increase following rising spread.
- Buy. Semiannual dividend yield of 2.8%
2014 fair value (DCF and sum of parts) is B368. We reiterate BUY for its 29%
upside and FY2014 P/E ratio of 7.6x (versus regional average P/E ratio of 10x).
2H13 dividend was announced at B8/share or a semiannual dividend yield of
2.8% (XD date is on 6 March 2014).